Rudd claims victory on health

Prime Minister
Kevin Rudd
has set the scene for an election on health and tax reform by winning the support of all states except Western Australia for a historic deal to claw back GST revenue for a new national healthcare system.

The Prime Minister was forced to make substantial concessions yesterday to strike the incomplete agreement, including an extra $800 million for hospital beds and ­allowing the states a greater say in how the GST money is spent on hospitals.

He also gave ground to Victoria and NSW by agreeing that the commonwealth’s funding would be channelled into new state-based payment authorities instead of going straight to local hospital networks.

Signalling he may be prepared to use healthcare as a trigger for a ­double-dissolution election, Mr Rudd demanded the federal opposition back his proposed means test on the private health insurance rebate, providing an estimated $1.9 billion in savings over four years.

But the government still needs to find $5.4 billion more in savings over four years in the budget next month to pay for the inducements the Prime Minister was forced to give the states over the past three weeks.

But Mr Rudd claimed the agreement represented a “very, very big ­reform" to the hospitals system.

“As the dominant funder of the hospitals system [and] the exclusive funder of the primary care system and the exclusive funder of the aged-care system, the buck stops with me," he said.

The deal was achieved after Vic­torian Premier
John Brumby
, who had been the most outspoken critic of Mr Rudd’s reforms, was swayed by the promise of pooled funding and an ­extra $800 million for sub-acute beds.

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“It is true that I moved my position a significant way and I think it’s fair to say that the federal government – the Prime Minister – has also shifted. I think that’s the art of good leadership," Mr Brumby said.

But the Prime Minister will continue talks with WA Premier
Colin Barnett
over the period to July 1, when the additional federal funding becomes available.

Mr Rudd’s office last night released legal advice that says the commonwealth does not need WA’s ­support to make the necessary alter­ations to intergovernmental agreements to revise GST arrangements with the remaining states.

Mr Barnett is forgoing $550 million over four years in new commonwealth health funding by his decision to resist Mr Rudd’s plan, but the WA Premier said his state would not forgo GST funding since in his view it ­already got a raw deal from the Commonwealth Grants Commission.

Yesterday’s agreement paves the way for a showdown with the opposition, given the new health and GST arrangements require parliament to pass amendments to two main pieces of legislation – the intergovernmental agreement on health and hospitals and the federal-state financial relations arrangements.

Opposition Leader
Tony Abbott
dismissed the agreement as a “political fix" and called on Mr Rudd to explain how he would fund $5 billion in inducements to the states.

“On the face of it, it’s a plan for a bigger bureaucracy, not better hospitals," he said.

But his health spokesman, Peter Dutton, refused to say whether the coalition would vote against it.

Under the reforms, to be implemented over three years, the commonwealth will be the sole funder of primary and aged care and 60 per cent funder of public hospitals.

The hospitals money, which shifts from block grants to activity-based payments, will be directed into seven pooled funds, which then channel funds to local hospitals networks.

NSW Premier
Kristina Keneally
said Mr Rudd had agreed to cut the number of hospitals networks from 150 to 90, amid concerns Mr Rudd’s original plan would have created too many small bureaucracies.

The Prime Minister met individually with the premiers of NSW, Vic­toria and Western Australia to thrash out stumbling blocks to a deal on his health plan.

The premiers of Queensland, South Australia and Tasmania were largely in agreement with Mr Rudd at the start of the COAG meeting on Monday.

Mr Rudd won an early breakthrough in his efforts to persuade NSW and Victoria after meeting Ms Keneally individually early on the second day of the marathon COAG meeting.

At this meeting, he made a number of key concessions, including an ­offer of further funding, agreeing to a pooled funding arrangement of federal and state finances and a guarantee the federal government would not claw back more GST in future.

In a key breakthrough, Ms Keneally also secured an extra $800 million in commonwealth funding for acute-care beds, which help relieve pressure on hospitals providing a route for elderly people and patients with long-running illnesses, such as the mentally ill, to transition back into community-based care.

Combined with the $800 million Mr Rudd had promised the day before, the commonwealth expects to fund an extra 1600 sub-acute beds by 2013-14.

A further $174 million was promised for mental health, especially among younger people.

Ms Keneally worked until the early hours of yesterday on the compromise proposal, which was finally agreed between the federal government and the states.

“We said we wanted to protect our GST. I believe that the negotiated outcome we have achieved with the commonwealth allows us to do that," she said.

Mr Rudd met with Mr Brumby three times on Monday night and Tuesday, offering Victoria greater funding and allowing state management of the pooled funds.

But Mr Barnett held firm against the deal, despite Mr Rudd’s efforts in a one-on-one meeting.